Weissman
BP generates enough cash to absorb its liabilities from the oil gusher in the Gulf of Mexico.
But that doesn’t mean it will.
One of the benefits of the corporate form is that it gives giant corporations the ability to escape liability. BP may or may not choose to capitalize on such escapes, but it would be foolish to presume that it won’t. That’s why President Obama’s call for the company to establish a $20 billion escrow account is such a positive and needed — if still inadequate — step.
Consider first the liabilities that BP may face. No one really knows what the damage from the oil gusher or the overall costs to BP may ultimately be. Some analysts are now throwing around numbers of $70 billion on the upper end — but it’s not hard to see how the ultimate cost to BP could rise even higher.
The company faces civil fines of up to $3,000 per barrel of oil polluting the ocean. If the gusher lasts for four months at 40,000 barrels a day, the fine alone could hit $14 billion. If it is found that the actual oil flow is double that level, the fine could potentially approach $30 billion — more, if the gusher lasts for more than four months.
Beyond the payments the company is making, it is going to face massive lawsuits, with damages surely in the billions and quite possibly in the tens of billions. On top of that, it may face a massive
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